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TOWSON / Economics / ECON 201 / In microeconomics what does hh stand for?

# In microeconomics what does hh stand for? Description

##### Description: These notes cover what was discussed in Professor Leppo's ECON 201 class at Towson University.
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ECON 201 Microeconomics

## In microeconomics what does hh stand for?

Notes taken, interpreted, and formatted by: Jensine Bonner

Terms to Know:

^ (HH) - Household (BF) - Business Firm (G) - Government

^ (s) - services (g) – goods (l) - labor (S) - supply (P) - price

^ (QS) - Quantity Supply (QD) – Quantity Demand New (Es)- Elasticity Supply

^ (K) - Capital New (Ed)- Elasticity Demand New (PD)- Price Demanded New (TR)-  Total Revenue

^ (MC) - Marginal Cost (MP) - Marginal Principle (MB) - Marginal Benefit  Week 5 of Notes: Chapter 5- Elasticity

2/29/16

(P) Price of Elasticity of (D) Demand

The overall responsiveness of (QD) to the changes in (P)

## In microeconomics what does bf stand for?

Calculate -> Ed

(The Price elasticity of Demand)

 % QD / % P

 Top: New QD- Old QD/Old PD

Bottom: New P- Old P/ Old P

Based on the #’s-> they’ll determine if you are elastic or inelastic  Elastic: Consumers are responsive Don't forget about the age old question of What is the time period of paleolithic age?

Ed > 1 (The Elasticity of Demand is Greater than 1)

% QD > % P

The P increases, and the QD decreases by a larger percentage

Ex. P increases by 8%, so QD will decrease by 16%

Inelastic: Consumers are not very responsive

Ed < 1 (The Elasticity of Demand is Less than 1)

% QD < % P

## In microeconomics what does qs stand for?

The P increases, and the QD decreases by a slightly larger amount  Ex. P increases by 8% so the QD will decrease by less than 16% Unit Elastic: Consumers are proportionally responsiveDon't forget about the age old question of What are the stages of sensorimotor development?
Don't forget about the age old question of What are substitutes and complements and give examples?

Ed = 1 (The Elasticity of Demand is equal to 1)

% QD = % D (Demand)

Ex. The P decreases by 8, so the QD increases by 8.

Ex. 2 Likewise, the P increases by 8, so the QD decreases by 8

3/2/16

Examples for calculating elasticity

Example 1

% QD = 10%

% P = 5%

---------------------------

Ed= 10%/5% = .2 This means that a 5% change in price = a 10% change in  demand If you want to learn more check out What does it mean when a change in velocity is negative?

Price Elasticity coefficient of Demand:

% QD

12-2-/20 = l – 8/20l = 8/20= .4 -> 40%

When working with the price elasticity o’ demand (1) of the 2 #’s will be negative.  This means that you cannot assume that a problem will be inelastic.

Must take the absolute value

Determinants of Elasticity

1) Substitutes

The items which we have more of are relatively elastic

When there are not a lot of substitutes, the product(s) are inelastic  2) Time

The longer the period of time, the more the substitute(s) will become available

 The longer/more = more elastic

 Less time= less elastic

3) Size of Budget

(2) ways to address how elasticity is determined by the size of one’s budget  1) Income groups

Poor, Middle (Class), Rich

If one is Rich then, everything is inelastic. Why? You don’t need a substitute  because you can pay for it with ease- little financial strain.

(P) or (M)

Most products tend to be elastic (There will be more than one option)

2) How much of the budget the item consumes or will  consume

Items that are lower priced will tend to be: inelastic  Don't forget about the age old question of What is the meaning of rigid in packaging?
We also discuss several other topics like What is the other term for arenes?

Prices that are higher priced: elastic

4) Luxury

Luxury items tend to be: elastic

Consumers will tend to find a more cost efficient substitute

5) Necessity

Despite the price, the consumer will buy it so, it is -> inelastic

Most inelastic items: salt, & insulin

Elastic: cars, movies

Unit elastic: houses, fruit juice

3/4/16

Elastic: >1, % Q is larger than % P, decrease in total revenue when there is an  increase in price, increase total revenue when there is a decrease in price

Inelastic: < 1, % P is larger than the % in Q, increase in total revenue when  there is an increase in price, decrease in total revenue when there is a decrease in  price

Unit Elastic: = 1, the % Q is = to the % P, there is no difference/change in  total revenue when there is an increase or decrease in price

- When inelastic, there will be a push to increase the price which is ultimately  pushing toward unit elasticity

- Unit elasticity = maximum revenue

- Elasticity means that there will be a lower price, more & more customers, and then they will stop coming

Supply

Price elasticity of supply

Responsive of producers to changes in price

Es( Elasticity of Supply) = % QS/ % P

- Producers are very responsive to price changes

- With demand, be sure to take the absolute value, with supply, do not have to  calculate it

- The slope and origin determine the price elasticity

- Inelastic take to the origin, origin- quantity

- Unit elastic= proportionate

End of Week 5 Notes. I hope that they were helpful to you. Notes will be uploaded  weekly, so be sure to come back again!

Up Next: Week 6 Notes

- Jensine

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